Pivot to Residential From Commercial Development Means Lower Income, Higher Costs for Some Cities

QUEEN CREEK, Ariz.—For years, this growing suburb of Phoenix had been anticipating the development of an open-air mall on 500 acres, a project that promised to be the main commercial center—and tax generator—on the town's southern end.

Since the project was approved in 2006, however, the retrenchment of brick-and-mortar stores nationally and the rise of online shopping have led executives at developer WDP Partners LLC to conclude...